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Wednesday, October 24, 2012

Top 6 Reasons New Businesses Fail

It's often said that more
than half of new businesses fail during the first year. According to the Small
Business Association (SBA), this isn't necessarily true. The SBA states that
only 30% of new businesses fail during the first two years of being open, 50%
during the first five years and 66% during the first 10. The SBA goes on to
state that only 25% make it to 15 years or more.However, not all of these businesses
need to fail. With the right planning, funding and flexibility, businesses have
a better chance of succeeding. We'll go through some of the biggest mistakes
that start-ups can make and figure out how to improve your chances of success.

Reason #1: Not Investigating the Market

So you've always wanted to
open a real estate agency, and you finally have the means to do so, but your
desire to open the agency blinds you to the fact that we're in a down housing
market and the area where you want to work is already saturated with agencies,
making it very difficult to break in. This is a mistake that will cause you to
fail from the beginning. You have to find an opening or unmet need within a
market and then fill it rather than try and force your product or service in.
It's a lot easier to satisfy a need rather than create one and convince people
that they want to spend money on it.

Reason #2: Business Plan Problems

A solid and realisticbusiness planis the basis of a successful business.
In the plan, you will outline realistic goals for your business, how your
business can meet those goals and possible problems and solutions. The plan
will figure out if there's a need for the business through research and
surveys; it will figure out the costs and inputs needed for the business; and
it will outline strategies and time lines that should be implemented and met.

Reason #3: Too Little Financing

If you have started a
company and things aren't working out, you've got little capital and a
struggling business; you're really not in a good position to ask for another
loan. Be realistic at the beginning, and start with enough money that will last
you to the point where you're business is up and running, and cash is actually
flowing in. Trying to stretch your finances at the beginning may mean that your
business never gets off the ground, and you'll still have a lot of cash to
repay.

Reason #4: Bad Location, Internet Presence and Marketing

A bad location is
self-explanatory if your business relies on location for foot traffic. Just as
dangerous, however, is internet presence. These days, your location on the
internet and your social media presence can be just as important as your
company's physical presence in a shopping district. Online presence will let people
know that they can give you their business, so if the need is already there,
the availability and visibility of your business is the next important step.

Reason #5: Rigidity

Once you've done the
planning, established your business and gained a customer base, don't get
complacent. The need that you're fulfilling may not always be there, monitor
the market and know when you may need to alter your business plan. Being on top
of key trends will allow you lots of time to adjust your strategy so that you
can remain successful. One must only look at the music industry or Blockbuster
video to know that successful industries can undergo huge changes.

Reason #6: Expanding Too Fast

Now that your business is
established and successful, it's time to expand, but you must treat the
expansion like you're starting all over again. If you're expanding the reach of
your business, make sure that you understand the areas and markets into which
you'll now be reaching. If you're expanding the scope and focus of your business,
make sure you understand your new products, service and intended consumer as
much as you do with your current successful business. When a business expands
too fast and doesn't take the same care with research, strategy and planning,
the financial drain of the failing business(es) can sink the whole enterprise.